The Cabinet approved Friday an extra budget totaling ¥4.47 trillion for this fiscal year, to support reconstruction efforts following natural disasters and prepare mitigation measures for similarly catastrophic events in the future.
To finance the additional spending, the government will issue ¥2.23 trillion of deficit-covering bonds to make up for a shortfall in tax revenue, which came on the back of a drop in corporate contributions amid a slowdown in the global economy.
It is the first time in three years for the world’s third-largest economy to issue additional deficit-covering bonds in the middle of a fiscal year.
The move could hurt Japan’s efforts to improve its fiscal position — the worst among major developed countries.
In the supplementary budget through next March, the government has allocated around ¥2.31 trillion for reconstruction from Typhoon Hagibis and other recent disasters, as well as to build infrastructure to prepare for the future.
Among other projects, ¥384.7 billion will be used for projects to help small and midsize companies improve productivity and navigate the transition to a new generation of management.
Some ¥342.8 billion has been earmarked for measures to expand farm product exports.
The government also plans to spend ¥231.8 billion on procuring computers for public elementary and junior high schools by fiscal 2023, to promote education in information and communications technology.
Roughly ¥113.9 billion has been allocated for subsidies to seniors to encourage them to purchase vehicles equipped with automatic brakes and other advanced safety systems, amid an increase in the number of fatal traffic accidents involving elderly drivers.
These projects are part of an economic stimulus package worth ¥26 trillion that the Cabinet approved last week to prop up the economy, which is facing challenges posed by weak overseas demand and a domestic downturn in the wake of the 2 percent consumption tax hike on Oct. 1.
Retail sales saw their sharpest dive in more than four years in October, with a 7.1 percent drop compared to the same month last year.
Many economists have said the impact of the tax hike won’t last long, saying that consumption is likely to pick up next year.
The government has prepared a variety of measures meant to cushion the impact of the tax hike, including rewards programs for cashless payments, a free preschool education initiative and reduced levies for food and nonalcoholic beverages.
With these policies and the stimulus package, the government is hoping to avoid a repeat of the economic hit that was seen following the previous tax hike in 2014.
The package includes ¥13.2 trillion of outlays by the central and local governments, including the provision of low-interest loans to companies involved in infrastructure projects.
The Finance Ministry revised down its tax revenue estimate for this fiscal year, to ¥60.18 trillion from ¥62.50 trillion, amid a global economic slowdown triggered by a trade war between the United States and China.